Global Dialogue with Regulators – Strategies in Displacing Cash

The primary driver in Asia is e-commerce and in payment terms the objective of displacing cash and cheques with digital payments.

Various regulatory initiatives have been developed in order to achieve this: e.g. driving up the cost of cheque processing, looking at ways of making cash more expensive, driving down interchange rates to make the acceptance of debit cards easier for all merchants, forcing acquirers to deploy more POS, promoting domestic debit card systems in competition with the international schemes to further drive down the cost of debit card acceptance (again in an attempt to make acceptance ubiquitous), increasing contactless acceptance (because markets such as Australia have demonstrated that contactless increases debit card usage due to cardholder convenience factor). BNM’s Payment Card Reform Framework is a good example of this.

Challenges in displacing cash include:

• Strategies for tackling the unbanked;

• Strategies for ensuring ubiquitous terminalisation;

• Putting in place solutions for realtime P2P payments

• Emerging technologies and alternatives to card payments for B2C-

Whilst some regulators are still thinking in terms of the ‘old world’ 4-party model payment and card infrastructures, the new world is moving into more efficient push transactions via ACH or even leveraging digital currencies and blockchain type solutions.

In Europe we have seen payment legislation pushing for use of efficient ACH push and pull transactions via SEPA to facilitate e-commerce. The arrival of third party providers that provide the payment link between consumer, bank and e-merchant have gained ground. In addition, with the move to real time ACH in Europe (SEPA Instant payments) we are likely to see more efficient direct e-commerce payment capability outside of the traditional card networks.

At a global level the emergence of Bitcoin and blockchain is adding a further layer of innovation, which may result in a complete re-wiring of transaction infrastructure over the long run. Central banks, banks, governments and businesses are looking at possibilities of leveraging blockchain and distributed ledger technologies in order to enable efficient, real time solutions that remove back-office complexity and speed up settlement. The roll out of those solutions will significantly depend on the approach of regulators and the global consistency of regulatory measures in this space.

In order to allow regulators, supervisors, banks and FinTechs to understand how innovation can be embedded within the ecosystem, so-called regulatory sandboxes have developed around the world, enabling experimentation and learning. This objective is to avoid developing regulation that stifles innovation whilst at the same time ensuring that new risks are understood and properly tackled by legislation and supervision.

Join this keynote panel and hear from our panel of global experts and regional central bankers.